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Difference between revisions of "Contracts for Sale of Goods (11:III)"
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Contracts for Sale of Goods (11:III) (view source)
Revision as of 02:18, 21 September 2019
, 02:18, 21 September 2019no edit summary
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=== 2. Contract of Sale === | === 2. Contract of Sale === | ||
According to s 6(1), the SGA applies only where the purchaser agrees to buy goods with money as consideration. Hence gifts, barters, or exchanges are not subject to the SGA’s implied conditions and warranties. However, a court may avoid this result by finding two separate contracts rather than a barter, as long as the consideration, whether money or goods, has its value measured in monetary terms: see Messenger v Green, [1937] 2 DLR 26 (NSSC). Thus, if a total price is attached, there will be a sale, even if payment is in goods. | According to s 6(1), the SGA applies only where the purchaser agrees to buy goods with money as consideration. Hence gifts, barters, or exchanges are not subject to the SGA’s implied conditions and warranties. However, a court may avoid this result by finding two separate contracts rather than a barter, as long as the consideration, whether money or goods, has its value measured in monetary terms: see "Messenger v Green", [1937] 2 DLR 26 (NSSC). Thus, if a total price is attached, there will be a sale, even if payment is in goods. | ||
According to s 6(3) of the SGA, a contract of sale may be absolute or conditional. If the contract is subject to some condition to be fulfilled later, it is called an agreement to sell. | According to s 6(3) of the SGA, a contract of sale may be absolute or conditional. If the contract is subject to some condition to be fulfilled later, it is called an agreement to sell. | ||
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#the goods are of a description that is in the course of the seller’s business to supply. | #the goods are of a description that is in the course of the seller’s business to supply. | ||
Furthermore, the courts have held that the seller need not know the specific purpose for which the buyer wishes to use the goods. Knowledge of a broad purpose is sufficient. For example, in ''Sugiyama v Pilsen'', 2006 BCPC 265, para 71, the court held that section 18(a) provides a warranty that a car is “a reliable vehicle for use in driving in safety on the roads.” However, if the buyer wishes to use the goods for an unusual or peculiar purpose, this must be indicated to the seller. | Furthermore, the courts have held that the seller need not know the specific purpose for which the buyer wishes to use the goods. Knowledge of a broad purpose is sufficient. For example, in ''[https://www.canlii.org/en/bc/bcpc/doc/2006/2006bcpc265/2006bcpc265.html?resultIndex=1 Sugiyama v Pilsen]'', 2006 BCPC 265, para 71, the court held that section 18(a) provides a warranty that a car is “a reliable vehicle for use in driving in safety on the roads.” However, if the buyer wishes to use the goods for an unusual or peculiar purpose, this must be indicated to the seller. | ||
The “Patent and Trade Name Exception” is of little effect since the courts have interpreted it narrowly. The issue remains one of reliance, and the trade names exception will apply only where the buyer’s use of the patent or trade name indicates a lack of reliance upon the seller. In other words, the exception only applies where a consumer decides to purchase goods solely because of the trade name of a product without any reliance on representations by the seller. See ''Wharton v Tom Harris Chevrolet Oldsmobile Cadillac'', 2002 BCCA 78, paras 38-39. | The “Patent and Trade Name Exception” is of little effect since the courts have interpreted it narrowly. The issue remains one of reliance, and the trade names exception will apply only where the buyer’s use of the patent or trade name indicates a lack of reliance upon the seller. In other words, the exception only applies where a consumer decides to purchase goods solely because of the trade name of a product without any reliance on representations by the seller. See ''[http://canlii.ca/t/50dx#par38 Wharton v Tom Harris Chevrolet Oldsmobile Cadillac]'', 2002 BCCA 78, paras 38-39. | ||
==== e) Implied Condition of Merchantable Quality: s 18(b) ==== | ==== e) Implied Condition of Merchantable Quality: s 18(b) ==== | ||
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The concept of merchantable quality is difficult to define. A commonly used test, the '''price abatement''' test, asks whether a reasonable buyer, informed of the actual quality of the goods, would buy the goods without a substantial abatement of price (''BS Brown & Son v Craiks Ltd'', [1970] 1 All ER 823 (HL)). If the informed reasonable buyer would not buy without a substantial abatement of price, unmerchantable quality is inferred, and repudiation may be available. | The concept of merchantable quality is difficult to define. A commonly used test, the '''price abatement''' test, asks whether a reasonable buyer, informed of the actual quality of the goods, would buy the goods without a substantial abatement of price (''BS Brown & Son v Craiks Ltd'', [1970] 1 All ER 823 (HL)). If the informed reasonable buyer would not buy without a substantial abatement of price, unmerchantable quality is inferred, and repudiation may be available. | ||
Any damage to goods beyond the de minimus range, may be said to render the goods of unmerchantable quality (''International Business Machines v Shcherban'', [1925] 1 DLR 864 (Sask CA), [1925] 1 WWR 405). | Any damage to goods beyond the de minimus range, may be said to render the goods of unmerchantable quality (''[https://www.canlii.org/en/sk/skca/doc/1925/1925canlii154/1925canlii154.html?autocompleteStr=International%20Business%20Machines%20v%20Shcherban&autocompletePos=1 International Business Machines Co Ltd v Shcherban]'', [1925] 1 DLR 864 (Sask CA), [1925] 1 WWR 405). | ||
Section 18(b) applies to the sale of used goods as well. However, there is a lower standard here: the goods must be usable but not perfect. A minor defect does not necessarily render the goods unmerchantable. See ''Bartlett v Sidney Marcus Ltd'',[1965] 2 All ER 753 (Eng CA). | Section 18(b) applies to the sale of used goods as well. However, there is a lower standard here: the goods must be usable but not perfect. A minor defect does not necessarily render the goods unmerchantable. See ''Bartlett v Sidney Marcus Ltd'',[1965] 2 All ER 753 (Eng CA). | ||
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===== (3) Seller who Deals in Goods of that Description ===== | ===== (3) Seller who Deals in Goods of that Description ===== | ||
In addition to requiring that the sale be by description, section 18(b) also requires that the seller must “deal in goods of that description.” In '' | In addition to requiring that the sale be by description, section 18(b) also requires that the seller must “deal in goods of that description.” In ''[[2011 BCSC 927|Hartmann v McKerness]]'', 2011 BCSC 927, a seller sold a watch by description over eBay and was sued for violating the implied condition of merchantability in section 18(b). In paragraphs 43-47, the BC Supreme Court held that the eBay seller was not a seller “who dealt in goods of that description” for the purpose of 18(b), as he did not specialize in watches, but rather sold a large variety of goods. | ||
===== (4) Effect of Examination by the Buyer ===== | ===== (4) Effect of Examination by the Buyer ===== | ||
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At common law, to be awarded damages for breach of contract, those damages must be in the reasonable contemplation of both parties at the time the contract was formed. If the damages are too remote, they may not be recoverable under contract law. Both sides must be aware of the circumstances at the time of formation that would lead to damages if an obligation went un- or underperformed. This may encompass either implied circumstances, if reasonable, or special circumstances that were communicated at the time the contract was formed (''Hadley v Baxendale'' (1854), 156 ER 145 (Eng Ex Div)). Damages that were substantially likely and easily foreseeable at the time the contract was formed will be deemed to have been in the reasonable contemplation of the parties. Once the '''type''' of loss is found to have been foreseeable, the extent of damages can be recoverable even if the '''degree''' of damages is so extensive as to be unforeseeable. | At common law, to be awarded damages for breach of contract, those damages must be in the reasonable contemplation of both parties at the time the contract was formed. If the damages are too remote, they may not be recoverable under contract law. Both sides must be aware of the circumstances at the time of formation that would lead to damages if an obligation went un- or underperformed. This may encompass either implied circumstances, if reasonable, or special circumstances that were communicated at the time the contract was formed (''Hadley v Baxendale'' (1854), 156 ER 145 (Eng Ex Div)). Damages that were substantially likely and easily foreseeable at the time the contract was formed will be deemed to have been in the reasonable contemplation of the parties. Once the '''type''' of loss is found to have been foreseeable, the extent of damages can be recoverable even if the '''degree''' of damages is so extensive as to be unforeseeable. | ||
Parties have a common law '''duty to mitigate''' their damages from the date of the contractual breach. In a contract for the sale of goods, this means buying the goods elsewhere and suing the party who breached the contract for the additional amount paid for the goods over the contract price. In a contract for services, such as roof repair, this means hiring another party to do the repairs and suing the original party for the difference in price paid, if any. There is some jurisprudence that suggests when it is not feasible for a party to mitigate, they are excused from doing so. See ''Southcott Estates Inc v Toronto Catholic District School Board'', 2012 SCC 51. | Parties have a common law '''duty to mitigate''' their damages from the date of the contractual breach. In a contract for the sale of goods, this means buying the goods elsewhere and suing the party who breached the contract for the additional amount paid for the goods over the contract price. In a contract for services, such as roof repair, this means hiring another party to do the repairs and suing the original party for the difference in price paid, if any. There is some jurisprudence that suggests when it is not feasible for a party to mitigate, they are excused from doing so. See ''[https://www.canlii.org/en/ca/scc/doc/2012/2012scc51/2012scc51.html?resultIndex=1 Southcott Estates Inc v Toronto Catholic District School Board]'', 2012 SCC 51. | ||
=== 2. Breach of Warranty === | === 2. Breach of Warranty === | ||